question archive Our Consulting? Group, has been asked to consult on a potential preferred stock offering by Brave New World
Our Consulting? Group, has been asked to consult on a potential preferred stock offering by Brave New World
Subject:FinancePrice:2.86 Bought7
Our Consulting? Group, has been asked to consult on a potential preferred stock offering by Brave New World. This 14?% preferred stock issue would be sold at its par value of ?$50 per share. Flotation costs would total ?$4.00 per share. Calculate the cost of this preferred stock.
The cost of preferred stock is ______%?
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15.2173913%, or 15.22%
Step-by-step explanation
Annual dividend = $50 x 14% = 7
Price, net of costs = 50 - 4 = 46
Cost of preferred stock = Annual dividend / Current price
Cost of preferred stock = 7 / 46
Cost of preferred stock = 0.152173913, or 15.22%
